Materials Management

an overview

Introduction &
Importance of Materials
Management

5 Ms
Men
Machines
Methods
Money
Materials

Reasons for popularity of

materials
The amount spent on materials is higher
than other inputs
Materials offer considerable scope for
reducing cost and improving profit
Improving return on investment depends on
the effective utilization of materials.
Materials add value to product
Quality of end product depends on
materials

Reasons for popularity of

materials
Materials management assumes
responsibility for whatever happens in
purchasing, storing, inventory or any other
area connected with materials.
Increasing demand for ensuring
environmental safety
The efficiency of any organization depends
upon the availability of right materials, in
right quantity, at right time and at right
price.
Materials are life-blood of mans

 Materials

management involves
planning, programming,
organizing, directing, controlling,
and co-ordinating the various
activities concerning the
materials.
The production managers found
it necessary to develop an
organized body of knowledge on

Materials Management

Materials are any commodities used directly or

indirectly in producing a product such as raw
materials, component parts or assemblies.

Materials management is the grouping of

management functions supporting the complete
cycle of material flow, from the purchase and
internal control of production materials to the
planning and control of work in process to the
warehousing, shipping, and distribution of the
finished product.

Thomas F. Wallace & John R. Dougherty

Materials management is the

management of the flow of materials
into an organization to the point, where,
those materials are converted into the
firms end product(s)

Bailey & Farmer

Functions of Materials
Management

Materials planning and programming

Raw material purchase
Receiving, store keeping, and warehousing
Issuing of material
Inventory control
Value engineering
Transportation of materials
Vendor development
Vendor rating
Disposal of scrap and surpluses

Focus of Material
Management
To

procure right materials

In Right Quantity
Of
Right Quality
At Right Time
From
Right sources
At Right prices

5 Rs, principles of purchasing

Primary Objectives

Buying the best item at the lowest cost

Reduction in inventory cost and High
inventory turnover
Maintaining the flow of production
Maintaining the consistency of quality

Primary Objectives

Optimization of acquisition and

possession, resulting in lower cost
Cordial relationship with suppliers
Maintaining good records
Contribution towards competitiveness
Personnel development

Secondary Objectives
Promotion

of standardization with

suppliers
Development of reciprocal relations
with customers
Committees to decide on economic
make or- buy decisions
Development of inter departmental
relationships
Economic forecast
New materials and product

Costs involved in the

Management of Materials
Ordering

Cost

Cost of placing an order

Loading and unloading of goods
Transportation Costs
Insurance for goods in transit
Cost of receiving and inspection
Administration Cost
Taxes and Duties

Costs involved in the

Management of Materials
Carrying

Costs

Warehouse
Lighting
Insurance
Cold Storage and Refrigeration
Supervision Cost
Preservatives
Breakage
Pilferage

Integrated approach to
Materials Management

Integrated approach to
Materials Management

Organizing Materials
Management.
Organization

based on Commodities
Organization based on Location
Organization based on function

Organization based on
Commodities

Organization based on
Commodities
Here

items are classified according to

their nature such as raw materials,
components, spares, imported items,
finished goods etc. and assigned to
individuals.
No wasteful duplication of efforts as
each commodity will be separately
handled.
Bulk buying and standardization are
facilitated; the group becomes

Advantages

Organization based on
Location

If the organization has several plants located in

different plants of the country,

There are two alternatives

1.

2.

Centralized materials management (CMM)

&
Decentralized materials management
(DCMM).

Centralized materials
management
The most important benefit is combining
requirements of all plants and go for bulk
buying which will result in substantial
reduction in costs,
Interplant transfer of material is possible
in case of emergency,
Surplus materials can be effectively used
by other plants, since only one materials
management department,
Since only one materials management
department- Highly skilled workforce is

Decentralized materials
management
Better co-ordination with plants
production, Financing & marketing
department are possible.
Plants product lines play an important role
i.e. each plant may require some unique
materials which can be better managed
by DCMM.

Organization based on
Location.

Now a days combination of both Centralized and

Decentralized materials management is possible.
Policies, procedures and systems for all plants are
laid out by the CMM system.
Continues feedback is maintained in the
operations of the DCMM departments.
Specific financial limits will be set by the CMM
Department beyond which the DCMM department
will have no authority.
Bulk buying of common usage items is done by
the CMM department.

Comparative Study

Organization based on
function
The

materials management department

is structured on the basis of function
such as stores, transport, purchase etc.
All purchasing activities of a particular
function will be under one individual
who reports to the material manager

Thank You